KiwiSaver funds took a hit this week after the sharemarket slid deeper into correction territory as markets became increasingly nervous before next week's US election and concerns about what a victory for Republican candidate Donald Trump could mean for world trade.
By the close yesterday, the S&P/NZX50 Index had fallen 70.5 points, or 1.1 per cent and was down 11.4 per cent from its all time record high of 7571 reached on September 7.
A decline of 10 per cent or more is regarded as a correction, while a move down of 20 per cent is a bear market.
Analysts viewed the fall as a natural consequence of rising world interest rates which have made New Zealand, with its many yield stocks, less attractive to investors.
Salt Funds Management managing director Matt Goodson said Kiwisaver funds with a conservative, low-risk bias with greater exposure to government bonds would have fared better than the "growth" funds.
The NZ share market has been favoured in a low-interest rate, post-global financial crisis world because of its comparatively high proportion of dividend-paying utilities such as Auckland International Airport, big power companies and telco Spark.
The US share market is 4.7 per cent down from its peak, and the Australian market is down by 6.5 per cent due what Goodson called "rotation".
"We have seen a bit of a lift in bond yields, not vast, but what that has sparked is a very sharp rotation out of dividend yield names and into cyclical names," he said.
"Globally, you have seen banks and resource stocks, which we don't have many of, perform quite strongly over the last few weeks."
The local market has been inflated by cash trying to find a home in a world where interest rates are near zero or even negative. Goodson said the latest pullback on the sharemarket was "a wake-up call for a lot of overpriced defensive stocks".
Signs of a turn in the housing market were also making their presence felt in the retirement village companies, which make up a big part of the local market.
Mark Lister, of Craigs Investment Partners, said that unlike previous sell-offs, the decline was not in response to economic weakness.
Equity markets have had a stonking great run and they have got a bit ahead of themselves.
NZ economic growth came to 3.6per cent in the June year and data this week showed employment grew by 1.4 per cent in the quarter, well ahead of an expected 0.5 per cent gain.
In addition, prices for dairy, NZ 's biggest export have been rallying sharply. Lister said the market had, in the past week or so, been driven by worries about the possibility of anti-free trade Donald Trump becoming the next US president. Analysts have said that a win for Trump would have a negative impact on world markets.
The market has enjoyed a strong run, in the 12 months to September, the index has gained 36 per cent, so analysts have long regarded the market as being over-priced.
"Equity markets have had a stonking great run and they have got a bit ahead of themselves," said Harbour Asset Management portfolio manager Shane Solly.
"We would say that our market has become over-valued but we still think New Zealand stocks and the economy stack up pretty well.